Albertsons 2004 Annual Report Download - page 78

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SUPERVALU INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET ARRANGEMENTS
The company has guaranteed certain leases, fixture financing loans and other debt obligations of various
retailers at February 28, 2004. These guarantees were generally made to support the business growth of affiliated
retailers. The guarantees are generally for the entire term of the lease or other debt obligation with remaining
terms that range from less than one year to twenty-two years, with a weighted average remaining term of
approximately ten years. For each guarantee issued, if the affiliated retailer defaults on a payment, the company
would be required to make payments under its guarantee. Generally, the guarantees are secured by
indemnification agreements or personal guarantees of the affiliated retailer. At February 28, 2004, the maximum
amount of undiscounted payments the company would be required to make in the event of default of all
guarantees was $290.4 million and represented $180.3 million on a discounted basis. No amount has been
accrued for the company’s obligation under its guaranty arrangements. In addition, the company has guaranteed a
construction loan on a warehouse of $1.5 million at February 28, 2004 that the company will purchase upon
completion. The company has evaluated its agreements that contain guarantees and indemnification clauses in
accordance with the guidance of FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. As of February 28,
2004, the company did not have any material guarantees that were issued or modified since December 31, 2002.
The company is party to synthetic leasing programs for two of its major warehouses. The leases expire in
September 2004 and April 2008. The lease that expires in September 2004 may be renewed with the lessor’s
consent through September 2006, and has a purchase option of approximately $25 million. The lease that expires
in April 2008 has a purchase option of $60.0 million. At February 28, 2004, the estimated market value of the
properties underlying these leases equaled or exceeded the purchase options. The company’s obligation under its
guaranty arrangements related to these synthetic leases had a carrying balance of $2.8 million, which is reflected
as a component of other liabilities in the Consolidated Balance Sheets at February 28, 2004.
The company had $145.7 million of outstanding letters of credit as of February 28, 2004, of which $120.1
million were issued under the credit facility and $25.6 million were issued under separate agreements with
financial institutions. These letters of credit primarily support workers’ compensation, merchandise import
programs, and payment obligations. The company pays fees, which vary by instrument, of up to 1.125% on the
outstanding balance of the letter of credit.
In July and August 2002, several class action lawsuits were filed against the company and certain of its
officers and directors in the United States District Court for the District of Minnesota on behalf of purchasers of
the company’s securities between July 11, 1999 and June 26, 2002. The lawsuits have been consolidated into a
single action, in which it is alleged that the company and certain of its officers and directors violated Federal
securities laws by issuing materially false and misleading statements relating to its financial performance. The
company believes that the lawsuit is without merit, intends to vigorously defend the action and presently has
moved for dismissal. No damages have been specified. The company is unable to evaluate the likelihood of
prevailing in the case at this stage of the proceedings.
The company is a party to various legal proceedings arising from the normal course of business activities,
none of which, in management’s opinion, is expected to have a material adverse impact on the Company’s
consolidated statement of earnings or consolidated financial position.
RETIREMENT PLANS
Substantially all non-union employees of the company and its subsidiaries are covered by various
contributory and non-contributory pension or profit sharing plans. The company also participates in several
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